; 3. Strategy Models
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3. Strategy Models


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									Strategic Marketing
  Strategy Models
             Porter’s Generic Strategies
Prof. Michael Porter has suggested three Generic strategies for success:
Overall Cost Leadership: The business works hard to achieve the lowest
   costs in production & distribution, service, R&D, etc. so it can price
   lower than its competitors and win large market share. Firms must be
   good at Engg., Purchasing, Mfg, and physical Distribution. However,
   problem is that other firms will compete with still lower costs (eg.
Product Differentiation: The firm comes up with a unique product in the
   market. Concentrates on achieving Technological superiority/
   Specialized skills/Innovations that enables it to offer superior
   performance in an important customer benefit area valued by a large
   part of the market. Quality leadership by using best components, put
   them together expertly, inspect them carefully and effectively,
   communicate their quality, eg. Intel Corp (Microprocessors) and NOKIA
   (Cell phones) introducing new products at breakneck speed.
Focus: On one or more narrow market segments. The firm gets to know
   these segments intimately and pursues either cost leadership or
   differentiation within the target segment (eg., ‟Pedigree‟ pet foods/Pet
   products/Pet parlours).
                              Dr. B. K. Mukherjee                         2
                  The Competitive edge
In order to succeed, companies need:
a. Excellence: Thomas J. Peters & Robert H. Waterman, Jr., “In search of
   Excellence: Lessons from America‟s best run Cos.”
            Eight Characteristics of Excellent Management Practice
   1. Bias for Action – Do it, Fix it, Try it.
   2. Closeness to the customer – listen intently and regularly to the
   customer and provide quality, service and reliability in response to
   customer needs.
   3. Autonomy and Entrepreneurship – innovation and risk-taking as an
   expected way of doing things, rather than conformity and conservatism.
   4. Productivity through people – employees are seen as the source of
   quality and productivity.
   5. Hands-on, Value driven – the basic philosophy of the organization is
   well-defined and articulated.
   6. Stick to the knitting – stay close to what you can do well.
   7. Simple form, lean staff – structural arrangements and systems are
   simple, with small headquarters staff.
   8. Simultaneous loose-tight properties – centralized control of values, but
   operational decentralization and autonomy.

                              Dr. B. K. Mukherjee                           3
          The Competitive edge (contd.)
b. Innovation: Strong R&D efforts, leading to innovative products,
    processes and operations. This will help in both Cost leadership as well
    as Differentiation.
c. Anticipation: Effective forecasting and efficient Market Research,
    enabling the company to know in advance the emerging market trends
    and future customer preferences.

In order to enjoy the competitive edge companies have to be good in any
   or all of the following:
Operational Excellence – eg, case of the Toyota „zeros‟.
Product Leadership – through leading edge Technology and Innovation,
   eg, 3M Corp.with more than 3000 new products introduced every year.
   NOKIA comes out with average one new model a week!
Customer intimacy – closeness to the customer that fosters brand loyalty,
   eg, Colgate, Amul.

                              Dr. B. K. Mukherjee                          4
         Strategy Formulation - The Ansoff Matrix
  Review of opportunities for improving the existing businesses’ performance

               Market Penetration Strategy                  Product Development Strategy
               • Increase Market share by                    • Add product features, product
                 - creating a SCA (Sustainable                 refinement
  Existing          Competitive Advantage) with              • Develop a new-generation product
  Markets           enhanced customer value.                 • Develop new (related) products for
               • Increase product usage through                the same market (through brand
                 - increase in frequency of use,               extension).

                 - increase in quantity of use, and
                 - new applications for current users.

               Market Development Strategy                        Diversification Strategy
  Markets      • Expand geographically                            • Related
               • Target new segments                              • Unrelated

                         Existing Products                                  New Products
H.Igor Ansoff’s ‘Product - Market Expansion Matrix, HBR, 1957 [Ref: Aaker David, Ch.11]
                                            Dr. B. K. Mukherjee                                     5

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